Strong occupier demand in India’s real estate market is surpassing institutional capital deployment, leading to a widening supply gap despite having $2.3 billion available for future investments, as per a report by Knight Frank India. Real estate-focused alternative investment funds have received $14.5 billion in capital commitments from 2021 to 2025, but only $7.9 billion has been raised and $5.7 billion deployed. The pace of institutional capital deployment is not keeping up with demand, causing a significant gap between the two.
Office assets are the preferred segment for institutional capital, offering stable income visibility with cap rates ranging from 7.25% to 7.75%, slightly higher than the 10-year Government of India bond yield of around 6.6%. The report highlights that if the entire $2.3 billion dry powder is invested solely in office development, it could generate approximately 12.2 million square feet of new supply, meeting about 14% of India’s annual office demand in 2025. This disparity between occupier demand and institutional capital availability underscores the investment potential in India for both domestic and global capital.
India’s top eight office markets have seen 307.7 million square feet of transactions in the last five years, surpassing the 236.1 million square feet of supply delivered during the same period. Consequently, the real estate market has shifted to a demand-driven cycle, with the supply-to-demand ratio dropping from 1.40x in 2008 to 0.63x in 2025, the lowest level on record. The warehousing sector is experiencing a similar trend, indicating that the challenge for Indian real estate is increasingly tied to capital availability rather than occupier demand.
